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If these companies get together and create a not for profit, how can for-profit providers even begin to negotiate with them. Also given the scale of these comp

If these companies get together and create a not for profit, how can for-profit providers even begin to negotiate with them. Also given the scale of these companies, wouldn't this raise healthcare costs for all others who don't work for one of them?

gamblor956 9y ago
Not necessarily. The largest driver of healthcare costs in the US is pharma profits. This venture, combined with the CVS/Aetna merger and the common drug factory venture, should place substantial downward pressure on pharmaceuticals to lower their prices or lose hundreds of millions in business...forever.
- aaavl2821 9y ago
  The largest driver of cost in the US healthcare system is actually hospital care (30% of spend) while drug costs account for ~10% Not to say that drug prices aren't too high but they are just one piece of the puzzle
  - tdfx 9y ago
    Where could one find more sources for this kind of information?
    - aaavl2821 9y ago
      page 33 of this (CDC report) shows breakdown of spend by category: https://www.cdc.gov/nchs/data/hus/hus16.pdf#093 https://www.cdc.gov/nchs/data/hus/hus16.pdf#093 here are the CMS stats for 2016: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html https://www.cms.gov/research-statistics-data-and-systems/sta...
aaavl2821 9y ago
Many not for profit providers in the US are actually quite profitable, and insurance companies, even for profit ones, have regulations regarding their profit taking (they must pay out like 85% of premiums they receive to cover medical expenses). So while not having a profit mandate can certainly help Amazon / brk/ JPM, scale and negotiating leverage are probably bigger drivers Interesting point re increasing costs for other companies, seems like it could certainly happen and maybe even lead to an arms race of employer consolidation. This phenomenon has happened in the hospital-insurance area, where a big hospital will buy up smaller providers and negotiate higher rates from insurers. The insurers then either have to consolidate and grow themselves or decrease rates to smaller providers, thus incentivizing smaller providers to join the big ones. This is a vicious cycle and I believe one of the main reasons for higher cost healthcare in the US. that said, healthcare is very local, so not sure if this new effort will impact local payer provider dynamics as much as it will increase more national scale issues like PBM and purchasing
- cosmie 9y ago
  The cycle you mentioned is certainly a vicious one. But you missed another: their cap on profit is percentage based. This disincentivizes the insurer from truly attempting to contain costs, because while the percentage of income they can take as profit is capped, the absolute value is not. This leads to underinvestment in attempting to contain costs except to the level that they can retain as overhead and a cycle of ever increasing premiums ensue. It's also a reason for insurers to vertically integrate and getting their hands in the PBM business and offering telemedicine services and whatnot. Doing so allows the insurance arm to "pay out" to non-insurance subsidiaries, where they can both count that as a medical cost from the insurance arm yet still capturing profit from the non-insurance arm. In which case, it's beneficial to have inefficient contracts that give the non-insurance subsidiary a lot of leeway to run efficiently and generate solid profits.
  - aaavl2821 9y ago
    That's interesting, hadn't heard that before. The combination of Amazon et als buying power could potentially drive out some of that inefficiency as they negotiate lower premiums and payers lower prices by cutting some of the "fluff"
gowld 9y ago
"Not-for-profit" simply means than profits pass through to management employees (who would otherwise be owners if it were for-profit) and supporting members (like the NFL). It says very little about overall revenue-vs-costs

gamblor956 9y ago

Not necessarily. The largest driver of healthcare costs in the US is pharma profits. This venture, combined with the CVS/Aetna merger and the common drug factory venture, should place substantial downward pressure on pharmaceuticals to lower their prices or lose hundreds of millions in business...forever.

aaavl2821 9y ago
The largest driver of cost in the US healthcare system is actually hospital care (30% of spend) while drug costs account for ~10% Not to say that drug prices aren't too high but they are just one piece of the puzzle
- tdfx 9y ago
  Where could one find more sources for this kind of information?
  - aaavl2821 9y ago
    page 33 of this (CDC report) shows breakdown of spend by category: https://www.cdc.gov/nchs/data/hus/hus16.pdf#093 https://www.cdc.gov/nchs/data/hus/hus16.pdf#093 here are the CMS stats for 2016: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html https://www.cms.gov/research-statistics-data-and-systems/sta...

aaavl2821 9y ago

Many not for profit providers in the US are actually quite profitable, and insurance companies, even for profit ones, have regulations regarding their profit taking (they must pay out like 85% of premiums they receive to cover medical expenses). So while not having a profit mandate can certainly help Amazon / brk/ JPM, scale and negotiating leverage are probably bigger drivers Interesting point re increasing costs for other companies, seems like it could certainly happen and maybe even lead to an arms race of employer consolidation. This phenomenon has happened in the hospital-insurance area, where a big hospital will buy up smaller providers and negotiate higher rates from insurers. The insurers then either have to consolidate and grow themselves or decrease rates to smaller providers, thus incentivizing smaller providers to join the big ones. This is a vicious cycle and I believe one of the main reasons for higher cost healthcare in the US. that said, healthcare is very local, so not sure if this new effort will impact local payer provider dynamics as much as it will increase more national scale issues like PBM and purchasing

cosmie 9y ago
The cycle you mentioned is certainly a vicious one. But you missed another: their cap on profit is percentage based. This disincentivizes the insurer from truly attempting to contain costs, because while the percentage of income they can take as profit is capped, the absolute value is not. This leads to underinvestment in attempting to contain costs except to the level that they can retain as overhead and a cycle of ever increasing premiums ensue. It's also a reason for insurers to vertically integrate and getting their hands in the PBM business and offering telemedicine services and whatnot. Doing so allows the insurance arm to "pay out" to non-insurance subsidiaries, where they can both count that as a medical cost from the insurance arm yet still capturing profit from the non-insurance arm. In which case, it's beneficial to have inefficient contracts that give the non-insurance subsidiary a lot of leeway to run efficiently and generate solid profits.
- aaavl2821 9y ago
  That's interesting, hadn't heard that before. The combination of Amazon et als buying power could potentially drive out some of that inefficiency as they negotiate lower premiums and payers lower prices by cutting some of the "fluff"

gowld 9y ago

"Not-for-profit" simply means than profits pass through to management employees (who would otherwise be owners if it were for-profit) and supporting members (like the NFL). It says very little about overall revenue-vs-costs